1.No one Knows with 100% certainty whether the trade will be profitable or not
2.No one knows how much money will be made or lost on a trade
3.If the Trader does not control the profit outcome and does not know with 100% which trades will work ,then a the trader should spend 100% percent of his time concentrating on the only element of the trade he can control-the risk of the trade.
For global stocks, the way down ($15 trillion lost in 7 months) has been much easier than the climb up ($30 trillion added in 4 years).
With markets from Asia to Europe entering bear markets this month, stocks worldwide have lost more than $14 trillion, or 20 percent, in value from a record last June amid worries over global growth and deepening oil declines. The pace of the drop has been so fast that it has already unraveled about half of the rally since a low in 2011.
The truth is, almost everything about superior investing is a two-edged sword:
-If you invest, you will lose money if the market declines.
-If you don’t invest, you will miss out on gains if the market rises.-Market timing will add value if it can be done right.
-Buy-and-hold will produce better results if timing can’t be done right.-Aggressiveness will help when the market rises but hurt when it falls.
-Defensiveness will help when the market falls but hurt when it rises.-If you concentrate your portfolio, your mistakes will kill you.
-If you diversify, the payoff from your successes will be diminished.-If you employ leverage, your successes will be magnified.
-If you employ leverage, your mistakes will be magnified.
“Really good traders are also capable of changing their mind in an instant. They can be dogmatic in their opinion and then immediately change it. If you can’t do that, you will get caught in a position and be wiped out.” -Steve Clark
The greatest traders have a huge conviction about their edge and trading method after confirming its ability to create long term profits. It is hard for many new traders to grasp that great traders are able to change their opinion about a trade in a manner of minutes for many reasons. Unlike other professions that are paid to be right,it costs traders if they will not admit they are wrong quickly. In a mechanical system stops must be taken when they are hit, in a discretionary system price movement is the dictator and the trader must be the slave. If you are short a stock and resistance is broken through and closed above with power, then you are wrong, you are now short a break out. If you buy support and the stock plunges far below where you expected the bounce then the stock has broken the range and may be in a down trend. (more…)
10. Malaysia – Bursa Malaysia stock exchange
Loss in 2014: -10pc
How to access this market: The best route to this stock market is via the iShares MSCI Malaysia ETF, which tracks the up and down movements of shares listed in Malaysia.
9. Mexico – Bolsa Mexicana de Valores SAB de CV stock exchange
Loss in 2014: -12pc
How to access this market: One option is to buy a fund that has a significant chunk of its money in Mexican shares, such as the Blackrock Latin American Investment trust, which has around 30pc of its money in the country. Alternatively there is SPDR MSCI Mexico Quality Mix ETF and the iShares MSCI Mexico Capped ETF.
8. Brazil – Bovespa stock exchange (more…)
It’s been a tough month for investors. As of yesterday, roughly half of the stocks in the S&P 500 have fallen into bear markets, with declines greater than 20%. International stock markets have fallen dramatically, with the losses accelerating on the heels of the latest Asian currency “event”.
We’ve seen stuff like this before. There is a worthwhile lesson in considering how a pair of history’s greatest investors have dealt with this kind of thing in the past.
On the surface, Warren Buffett and David Tepper don’t have a lot in common. One runs a diversified conglomerate and reinvests the insurance premiums into both long-term common stock positions and outright acquisitions of great companies. The other manages a hedge fund and aggressively trades in the markets each day.
But they have something in common that is worth considering today: Both Warren Buffett and David Tepper know that volatility is where returns come from and the losses of today set up the outsized gains of tomorrow. They’ve “lost” some money on the way to earning tons of it.
In the summer of 1998, there was a currency crisis that originated in the far east and eventually wound its way around the globe, culminating in the devaluation of the ruble and the blow-up / bailout of the first systemically risky hedge fund in history, Long Term Capital. Both Buffett and Tepper took quite a beating during this so-called “Asian Contagion” event.
As Nick Murray explains, Warren Buffett was down quite a bit that summer.
$6,200,000,000
A very large sum of money, wouldn’t you say? Now what, you ask, does it represent?
It is roughly how much Warren Buffett’s personal shareholdings in his Berkshire Hathaway, Inc. declined in value between July 17 and August 31, 1998. And now for the six billion dollar question. During those forty-five days, how much money did Warren Buffett lose in the stock market?
The answer is, of course, that he didn’t lose anything. Why? That’s simple: he didn’t sell.
